European Startups Battle Labor Laws for Best Talent

Berlin has become a startup hub, but needs the developers and programmers to power that growth.

As the cult of entrepreneurship spirals upward in Europe, the intricate vagaries of immigration policy on the continent are being newly scrutinized by our company-building classes. Freshly venture-backed European Internet companies want your talent, and they are going to remarkable lengths to get it—but not always legally.

For some, shortcuts aren’t (or haven’t yet been) required: Alicia Navarro, founder and chief executive of affiliate marketing startup Skimlinks, told Slashdot: “Interestingly, getting visas for non-EU residents has not been a problem for us. At least, not yet. We currently have five people here on a visa and it’s mainly a time- and money-consuming process. We’ve had only one case where we couldn’t bring the person in we wanted to. That was for a six-month internship with a Romanian national.”

Romania is in the European Union, but its citizens still need a visa to work in the U.K. “The specific issue was that there is no student visa for more than three months,” she added, “and the person in question needed to do a six-month internship to graduate from university. Getting a regular visa wasn’t an option because of the salary thresholds.”

For most startup chief executives in the U.S. and Europe, a combination of fudges, shortcuts, workarounds and, in some cases, “strategic decision-making” are—just about—getting their companies the talent they need. It’s prompted some to ask: why not just hire from home?

The short answer: they can’t. According to Silicon Valley Bank, 87 per cent of technology startups worldwide plan to do more hiring in 2013. (The figure rises to 90 per cent for software companies.) But nine in ten companies said they had problems finding the talent they needed locally: in Texas, 94 per cent of startups said they couldn’t find enough good quality engineers.

Part of the problem is the “reverse brain drain” of the last decade, which has seen talented and highly skilled Europeans flocking to Asia and India for lucrative consulting work in these fluid emerging markets. That should worry governments everywhere in Europe, particularly in Germany and the U.K. According to the Boston Consulting Group, Britain’s digital sector contributed £121 billion to the economy in 2010–8.3 per cent of GDP–and is expected to contribute £225 billion by 2016. But that growth is being throttled by a scarcity of good people.

So search processes, even for young technology businesses, inevitably involve some degree of international recruitment. Homegrown programming and business talent, even in high-profile places such as London and California, is seriously thin on the ground. Entrepreneurs and investors privately lay the blame for the chronic shortage of engineering talent at failing state-education systems in the U.K. and the U.S.

Schools and universities are failing to equip young people with the skills that twenty-first century digital businesses need, these people say. Those companies have to look further, to countries such as Poland, where development teams can be outsourced, or India, which works better for project-based subcontracting. But the ideal situation, most agree, would be freer movement of highly skilled workers through borders everywhere.

The time and expense that Navarro says is necessary to import a European national to work in the U.K. is not insignificant. The paperwork alone costs $1,000. As for importing workers from India or China… well, you had better really want them. But at least the situation is not as bad as in the U.S., says Brainient chief executive Emi Gal: “The paperwork costs for a European national to work in the U.S. are about $10,000,” he says. “It used to be that the cost was worth it, say five years ago. Now I’m not so sure.”

Before British startups get too triumphant, there are signs that, as in all things, Britain may be on an American trajectory: the rise of the right-wing political party Ukip is putting pressure on Prime Minister David Cameron to get tougher on, among other things, immigration. It’s not clear whether the Government will be smart enough to draw distinctions between benefit tourists and the skilled labor that is so desperately needed in the capital.

Then, of course, there are the outright horror stories that betray a Homeland Security-style approach to border control emerging in the European Union, as voters put pressure on their governments to staunch the flow of foreigners supposedly buffeting our borders. One entrepreneur who recently sold his startup told Slashdot: “Last night, my wife’s Canadian cousin flew in to London via Germany. She’s 21 years old and in September will start a yearlong college placement here. She was due to stay with us to help us out with our newborn baby, and also to do some unpaid work experience at my wife’s business.”

This entrepreneur added: “At immigration she was pulled up and asked what she was doing in the UK. This was apparently because she had a three-month stay booked, according to her tickets, and because her return ticket was via Berlin, where her boyfriend lives. She told them she was going to visit her family to help with their newborn.”

The cousin was refused entry into the U.K., where she was “stuck in a detention center, treated like a criminal and deported back to Germany this morning. Her passport was permanently marked. The reason given? She needs a visa to be a volunteer. If a 21-year-old Canadian visiting the U.K. to help her family has that experience, God help us startups in recruiting talent.”

Dramatic border episodes like this are one reason why startups, particularly those at the early stage, are playing fast and loose with the law, hanging onto employees once they get them in the country and paying them via circuitous or obscure routes (in some cases even cash-in-hand), in order to bypass what they see as arcane restrictions on who can be brought into the country.

A well-known Parisian venture capitalist who preferred not to be named told me yesterday that he knows of “at least nine” startups in France employing developers illegally, keeping them off the books not only to avoid France’s notoriously onerous labor laws but also because it would have been impossible, or simply too expensive, to import them officially.

According to this investor: “There is a sort of black market emerging in some European countries which in truth is entirely unnecessary. The legislation has got to catch up with reality here. We need people from elsewhere in the world, but small-mindedness and nationalism and pressure on governments from people who don’t understand the demands of enterprise are crippling a lot of good companies and forcing others to break the law just to meet their honest objectives.”

In Berlin, the scruffy, laid-back atmosphere of co-working space Betahaus and its associated ecosystem doesn’t seem to put out by bending the rules. There’s at least none of that crippling French guilt. Yesterday, I asked ten startups based here what their attitude was to importing skilled workers from elsewhere: their responses can be summarized as: just get them over the border. That attitude is a function of Berlin’s youth and naïveté as a startup hub, but it’s an attitude replicated across the continent by canny entrepreneurs, who generally take the maxim “act first, apologize afterwards” literally.

One respect in which Europe is doing better than the US is the so-called startup visa, which was introduced in March 2011–before any such legislation in the U.S. The startup visa does away with the usual points-based system and awards the right to work to “prospective entrepreneurs,” who are able to set up their company and look for funding prior to embarking on the official visa application procedure. Since April 2011, the top visa category has been reserved for “entrepreneurs, investors and the exceptionally talented.” Investors who deploy more than £10 million into the local economy will be able to settle in the U.K. after just two years, instead of the usual five.

Supporters of the visa point out that half of all Fortune 500 companies were founded by immigrants to America; if Europe has any hope of staging an economic renaissance to lift it from its present malaise, it must welcome the brightest and the best as the U.S. once did.

These changes may not help a startup looking to import engineers from Hyderabad, but it does at least mean that the U.K. is more accessible to bright young people out to start innovative companies. America is losing the race for talent, as academic Vivek Wadhwa persuasively argued in his 2012 book The Immigrant Exodus. Europe, for all its multitudinous other failings, is, at last, showing signs that it is open for business.

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Author Bio

Milo Yiannopoulos is a journalist who specializes in privacy, piracy, start-ups, Internet culture and the media. He has written for a wide variety of newspapers and magazines around the world. Stephen Fry once referred to him as a "cynical, ignorant [expletive]."